Egg packer has no power over price

In its submission to the UK Competition Commission,
giant packer Noble Foods (which was formed by the merger of Deans and Stonegate)
says it will still be too small to have any influence on supermarket egg
prices.

The Competition Commission is examining the merger of the two
companies, to see whether it will have power over its customers to raise prices
above competitive levels or to reduce service levels. Noble Foods says that will
not be the case.

The company's submission says that the merged companies will have no
influence on supermarket prices because of â€œinexorable growth in concentration
and market power among the leading UK retailers over the last 15 years.â€

â€œIf buyer power had been materially diminished as a result of the merger
one would expect to see fewer and smaller price reductions and greater ease for
the merged entity in pushing through price increases,â€ says the submission
document. â€œThat is not the case.â€

In addition the terms of trading between packer and supermarkets are loaded
heavily in favour of the retailers, says the document.

â€œThe own-label egg supplier's dependence is illustrated by the crippling
impact that a loss of significant business from a customer can have on the
economics of its business,â€ says the submission. â€œUnlike a manufactured goods
producer it cannot simply turn off the tap. The hens must go on being fed and
they will go on laying.â€ This means that the packer may have to off-load
surplus supplies at low prices and suffer substantial losses.